The VIX price suggests a spike in market volatility might be nearing
A weaker dollar (USD) and stronger equity markets has seen a risk on trade environment reflected through a gradual decline in the Volatility index (VIX) as well.
Often referred to as the ‘Fear’ guage, the VIX highlights the relationship between 30 day put and call options on the S&P500 benchmark index.
The index is known to reflect the cyclical nature of volatility and market participants will now be considering whether current prices, which trade near one year lows are suggestive for at least a near term spike in volatility to follow.
The VIX
The VIX has been drifting lower since late October 2022. The move lower follows a bearish price reversal near resistance at 34.30.
The long-term trend for the VIX remains sideways, as tends to be the nature and cyclicality of volatility.
Over the last few days, we have seen the price forming a bullish reversal just above range support at 18.20. The reversal starts to suggest that after a few months of a risk on market environment we could see the market move into a risk off phase.
The risk off market environment is not yet confirmed. For confirmation, we would like to see a strong move up above the red trend line on our chart. In this scenario 22.50 becomes and initial resistance target from the move, while traders might consider using a close below the 19.95 level as a failure indication for the trade should it manifest.
Key data
Over the next week or so there is certainly enough in the way of US data which could catalyze at least a near term spike in volatility which would reflect in the VIX:
- 10 Feb Preliminary UoM Consumer sentiment data
- 14 Feb Consumer Price Index (CPI) data month on month (m/m) and year on year (y/y)
- 14 Feb Core CPI data m/m and y/y
- 15 Feb Retail Sales m/m
- 15 Feb Core Retail Sales m/m
- 15 Feb Empire State Manufacturing Index data
- 16 Feb Producer Price Index (PPI) data m/m and y/y
- 16 Feb PPI data m/m and y/y
Amongst the data, the CPI release is likely to have the highest propensity for volatility, being a measure of inflation, a core theme in markets right now as it pertains to the path of monetary policy. While CPI is not the primary metric for the Federal Reserve to measure inflation (Personal Consumption Expenditure is), markets have in recent times taken their cues from each monthly print.
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Please see important Research Disclaimer.
Please also note that the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.
Live prices on most popular markets
- Forex
- Shares
- Indices
See more forex live prices
See more shares live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
See more indices live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.
